IMF Staff Concludes Visit to Senegal

IMF News, October 6, 2022

Source details

Mission dates: September 29 to October 6, 2022.
Mission leader: Mr. Edward Gemayel.
Purpose: take stock of recent economic developments, update growth and budget forecasts, and discuss the draft 2023 budget.
Meetings: Prime Minister Amadou Ba; Mr. Mamadou Moustapha Ba, Minister of Finance and Budget; the National Director of the BCEAO, Mr. Ahmadou Al Aminou Lo; and senior government officials.

Activity slowdown and growth revision:
- Activity in the secondary and services sectors slowed in the first half of 2022.
- Growth projection for 2022 revised downward to 4.7 percent.
Inflation and prices:
- Inflation reached a multi-decade high of 11.2 percent in August y/y.
- Food prices rose by 17.3 percent (August y/y).
- Average inflation in 2022 is now expected to reach 7.5 percent.
- Inflation is expected to gradually fall to 2 percent (medium term).
Fiscal position and public finances:
- Revenue collection through end-September was stronger than expected.
- Soaring energy subsidies are crowding out investment spending in 2022.
- The government envisages delaying some projects to contain the fiscal deficit at the targeted level of 6.2 percent of GDP.
- Fiscal consolidation projected in the 2023 budget is judged insufficient given tight financing constraints and rising public debt vulnerabilities.
Medium-term growth projection:
- Growth outlook appears favorable, averaging around 10 percent over the period 2023 and 2024, boosted by oil and gas production.

The impacts of the war in Ukraine and soaring commodity prices are taking a toll on the Senegalese economy.
Rising food prices are adversely impacting household living standards.
Soaring energy subsidies constitute a major fiscal challenge, reducing space for investment despite solid revenue performance.

Fiscal measures:
- Pursue revenue collection efforts more forcefully.
- Eliminate costly tax exemptions.
- More forcefully implement the medium-term revenue strategy.
- Set higher revenue collection targets.
- Implement credible commitments to phase out energy subsidies in the short to medium term.
- Reduce energy subsidies while protecting the most vulnerable in a targeted way.
Public procurement and energy sector governance:
- Streamline exemptions to the public procurement code for the energy sector.
- Finalize the revision of the legal framework to strictly limit exemptions to open and competitive tenders.
Subsidy management:
- Prepare and execute the roadmap for the control and better targeting of energy subsidies.
Objective: rebuild depleted fiscal buffers and set public debt on a downward trajectory; strengthen resilience to multiple shocks and build buffers to address future shocks.

Discussions for the final review under the Policy Coordination Instrument, the Stand-By Arrangement, and the Stand-By Credit Facility are planned for early November 2022.
The IMF team reaffirmed support to the government’s efforts to implement its economic reform program.

IMF Communications Department; Press Release No. 22/339; October 6, 2022.